Cost savings and new revenue opportunities are the top goals for supply chain digitization, and large organizations are running an average of 29 different pre-deployment digital supply chain initiatives. Due to a lack of focus, however, just one in seven of these organizations (14%) are succeeding in scaling them up, according to new research by Capgemini.

A new study called “The digital supply chain’s missing link: focus”, published at the end of 2018 by the Capgemini Research Institute, has identified a clear gap between expectations of what supply chain digitization can deliver and the reality of what companies are currently achieving. Exactly half of the organizations surveyed consider supply chain digitization to be one of their top three corporate priorities, especially in the UK (58%), Italy (56%), the Netherlands (54%) and Germany (53%). Over three quarters (77%) of companies said their supply chain digitization investments were driven by the desire for cost savings, with increasing revenues (56%) and supporting new business models (53%) also frequently cited. However, the large majority (86%) of these organizations are still struggling to get their pilot initiatives beyond the testing stage because they have spread their investments too thinly.

Uplift in revenue

The organizations surveyed have an average of 29 digital supply chain projects at the ideation, proof-of-concept or pilot stage. Just 14% have succeeded in scaling even one of their initiatives to multi-site or full-scale deployment. However, for those that have achieved scale, 94% report that these efforts have led directly to an uplift in revenue. This is in line with the results of the study, which found that ROI on automation in supply chain and procurement averaged 18% (compared to 15% for initiatives in Human Resources, 14% in Information Technology, 13% in Customer Service and 12% in Finance and Accounting and also R&D), with an average payback period of just twelve months.

Dharmendra Patwardhan, Head of the Digital Supply Chain Practice for Business Services at Capgemini, commented: “While most large organizations clearly grasp the importance of supply chain digitization, few appear to have implemented the necessary mechanisms and procedures to turn it into a reality. Companies are typically running too many projects, without enough infrastructure in place, and lack the kind of focused, long-term approach that has delivered success for market leaders in this area. Digitization of the supply chain will only be achieved by rationalizing current investments, progressing on those that can be shown to drive returns, and involving suppliers and distributors in the process of change.”